east west price differential

[silversky]

Hi Guys, Anyone else seen this website?   http://didthesystemcollapse.com/

Interesting little app on the difference in prices between the west and the Chinese exchange.  I've been looking at it for a couple of weeks now and it usually seems to hover around the $1.5 - $1.6 region for silver and around the $20 - $30 region for gold.

I see today we are a little further out of the normal range for both gold and silver.  The price in China is nearly $40 more for an ounce of gold and $1.66 for silver.  It was that price differential when both exchanges were open but China has now closed.  My understanding is that the Chinese exchange has closer T2 contract dates and is therefore based more on real physical prices but not sure if anyone knows any more on this.

It's certainly interesting to see.

Anyone got any thoughts on this?

Cheers

[fehk2001]

Because Chinese currency has hit 8 years low so they impose an import restrictions on gold to stop cash going out of the country,

Import restrictions is keeping the premiums high but there has been no real demand, that's why you will see such difference

[silversky]

Thanks for the reply fehk2001

Are you talking physical import restrictions or paper contract restrictions?  I heard completely the opposite regarding physical that there is actually a restriction on physical export for citizens. Maybe it's both?  My understanding also is that the Chinese are very happy to devalue their currency and have been trying to do so gently so as not to get under everyone's noses for it.  In fact that is something that Trump has been complaining about for at least a year now.  Not sure how all that plays into PM's with a currency that is not really free to float in large quantity.  I know that citizens can't exchange large amounts of RMB into dollars and vice versa, although I can take my left over Juan from a holiday into an exchange shop in Dubai and happily exchange them to dollars.  Not sure what the limit is though.

It makes one wonder why Shanghai would go to all the trouble of setting up the PM exchange in the first place.  After all, this is a new exchange and they went to some considerable lengths to set it up.  Was it just pride or is there a reason?

I might be completely wrong but my limited understanding is that they wanted to remove sole control of the price of paper PMs from the west.  The price of physical compared to paper is quite divorced at times and I'm guessing the desire to have a PM exchange more closely linked is probably something to do with that.  If anyone knows the full story please illuminate.

Cheers

[fehk2001]

On 10/12/2016 at 12:10, silversky said:

Thanks for the reply fehk2001

Are you talking physical import restrictions or paper contract restrictions?  I heard completely the opposite regarding physical that there is actually a restriction on physical export for citizens. Maybe it's both?  My understanding also is that the Chinese are very happy to devalue their currency and have been trying to do so gently so as not to get under everyone's noses for it.  In fact that is something that Trump has been complaining about for at least a year now.  Not sure how all that plays into PM's with a currency that is not really free to float in large quantity.  I know that citizens can't exchange large amounts of RMB into dollars and vice versa, although I can take my left over Juan from a holiday into an exchange shop in Dubai and happily exchange them to dollars.  Not sure what the limit is though.

It makes one wonder why Shanghai would go to all the trouble of setting up the PM exchange in the first place.  After all, this is a new exchange and they went to some considerable lengths to set it up.  Was it just pride or is there a reason?

I might be completely wrong but my limited understanding is that they wanted to remove sole control of the price of paper PMs from the west.  The price of physical compared to paper is quite divorced at times and I'm guessing the desire to have a PM exchange more closely linked is probably something to do with that.  If anyone knows the full story please illuminate.

Cheers

The restrictions are on both ways , out going is more due to on going corruptions crack down , they are happy to devalue their currency but only to some extend ( inflation ) 

nowadays , there is a new way to " spend " money from overseas , they will go to places like Macau / Hong Kong , purchase large amount of  insurance in usd and then after a while they will redeem it back to yuan . In the old days they will buy physical gold from the shops in Hong Kong and transport back to china but it is too dangerous now 

Bank of china head quarters  usually have a long queue of people wanting to buy gold but nowadays seems very quiet lol you have to have the bank account with them and over 800 pounds you have to proof who you are lol , early 2016 was unlimited 

[silversky]

Interesting.

 

[silversky]

Interestingly, during yesterdays big drop...  I saw that the differential in prices quoted was at one point $2.1 dollars more in china for silver and just shy of $60 more for gold!!  Seems hard to believe but maybe it's to do with thinner trading on the Shanghai exchange and no one wanting to sell physical there?  Either that or there must be buyers holding up the price over there or it would have fallen in line with the paper price in the west.  Both times when I saw the SGE open it came down a little but the paper price also quickly rose to narrow the gap a bit as well.  I realise there are restrictions on import export to China but it's certainly the case that dealers can export the medallions that people are collecting on this site so they can't be that severe.  If there were big import restrictions I could understand the higher premiums but that would also suggest that the Government doesn't want citizens owning PM's.  My understanding has always been that that is not the case but maybe I'm ill informed.  I also understood that they are quite happy for the Juan to devalue slowly so I can't see them restricting sales of Juan to dollars to buy western PM's being a big issue for them.  They are always being accused of manipulating their currency lower which is exactly what this arbitrage trade would be doing as far as I can work out.  Again maybe I'm being a bit thick. lol  The only explanation I can fathom is that any import restrictions are there for citizens rather than the central bank and provide an incentive not to sell export outside the country.  Perhaps that would tie into part of a slow stockpiling centralised policy.  The more I learn about PM's the more intriguing they become...